Reduce corporate taxes to attract more investments: KPMG

PTIDec 2, 2007, 05.35pm IST

MUMBAI: With the Finance Ministry initiating the process of budget preparation, global consultancy KPMG said India will have to reduce its corporate taxes to woo more foreign investors into the country.

"By 2010, some sort of softening is expected in the corporate taxes in India as the current level of growth demands a lower tax regime," KPMG's Global Head of Tax Loughlin Hickey told reporters here.

Hickey said according to a study held by KPMG, among 18 leading economies, India has been ranked third facing pressure from its tax regime.

As per the study, countries are experiencing pressure from various tax functions such as documentation requirements, higher level of accuracy, regulatory compliance requirements and time compression in financial reporting. Hong Kong has topped the list, followed by Canada.

India, which has become a prominent investment destination in the last decade, will have to reduce the corporate tax rates in the next three years, Hickey said. "They (India) want to attract more investors. Obviously, that will happen, only if the taxes are reduced," he said.

India has an estimated Rs 3 lakh crore target for 2007-08 and is understood to have registered a 41 per cent jump in the collection of corporate taxes so far this year.

In the pre-budget consultation, Industry representatives have reportedly asked government for a cut in corporate taxes to 25 per cent from the current 33.9 per cent.

Hickey also said only a lower and simple tax system can bring in better-compliance from tax payers. "If you want to develop more compliance in the tax system, you will have to lower the rates as well as make the process much simpler," Hickey said. This apart, the introduction of tools like PAN has also helped in tax compliance, he said.